Emergency Fund Suggestions

iVillage Member
Registered: 09-24-2004
Emergency Fund Suggestions
10
Fri, 10-22-2004 - 9:29am

Hi all,

Great idea about an emergency fund. Right now, I have gotten serious about trying to squeeze money from my budget to snowflake to the cc's. I would like to start an ER fund too, but don't know if I can do both. Any suggestions on how to start a ER fund, or how to squeeze it out of my budget. Should I do an ER fund over the snowballing?

Any advice would be helpful!

Thanks!
Carrie Anne

iVillage Member
Registered: 10-06-2003
Fri, 10-22-2004 - 9:44am

Would the emergency fund be INSTEAD of a savings account? Or do you have a savings and want an emergency fund too?

Every single piece of advice I have read on getting out of debt advocates putting *something* into your monthly savings, even if it's $25 a month. I think the saying is something like "pay yourself first." I would count putting money away for savings/emergency as critical as putting food in your mouth. But that's just from personal experience when even a small savings account/emergency fund would have saved me...

:)

iVillage Member
Registered: 09-24-2004
Fri, 10-22-2004 - 10:07am
It would be a combined ER/Savings account. Right now, my savings is depleated to literally $5. Sad, I know.
iVillage Member
Registered: 05-10-2004
Fri, 10-22-2004 - 10:30am

Hi there,


When we first started to get serious about paying off our debt, we were only able to put $10 a pay period into savings.

 

iVillage Member
Registered: 03-28-2003
Fri, 10-22-2004 - 10:45am

For us learning to save was the most important part of the debt reduction plan. I follow the Dave Ramsey plan and his baby steps.

1. $1000 emergency fund

2. Debt snowball. Smallest to largest balance.

3. 3-6 months emergency fund

4. 15% retirement funding

5. Kids college savings ( my kids are grown )

6. Pay off house ( mine is already paid off, but we'll soon be building )

7. Build wealth

The emergency fund is essential to avoid using your credit cards for emergencies.

Julie

iVillage Member
Registered: 05-30-2003
Fri, 10-22-2004 - 12:38pm

Yep, we do the "Dave Thing" too-and I tell you, that baby emergency fund makes me VERY happy!

It's not often that I can't cover things just using the debt snowball for the month, but there's been a couple of times that we've used the e-fund this year.

The way I look at it is that with the $1000 emergency fund at our backs, we both feel more confident about chucking so much at the targeted debt. We know that if things go wrong somewhere and something happens, we don't have to yank out the credit cards (I'd have to FIND them first...)

An emergency fund is one of the best gifts you can give yourself while getting debt-free.
As to whether to do it OR snowballing-it's up to you. DH & I follow Dave Ramsey's plan pretty closely because as DH says, "Obviously, our way wasn't working very well." So, for us, we got that $1000 in the bank FIRST before starting on Baby Step 2-the Snowball.

~Lisa

iVillage Member
Registered: 03-30-2003
Fri, 10-22-2004 - 1:43pm

I guess this all depends on your "relationship" with money. I think its more important to pay off your credit card before builidng an emergency fund. Mainly because there interest on the credit card is working against you (except when you're on the 0% interest credit card). When you're paying off a XX% credit card, you're basically "earning" the interest. Your interest in savings at X% is no where compare to you credit card interest. If worst comes to worst, you can always use your credit card as an emergency becuase you'll have credit from paying it off. From another perspective, though, I understand how it feels to have some emergency cash for something. Sense of security.

My husband and I put every purchase on our credit card (which earns us 1% cash back on purchases and 5% back on grocery/gas). Pay off balances each month. It took us a while to get where we are. make use of those accounts that are zero percent interest and no fee in transfering balances.

Good luck.

iVillage Member
Registered: 09-24-2004
Fri, 10-22-2004 - 3:15pm
What is the Dave Ramsey plan exactly?
iVillage Member
Registered: 03-28-2003
Fri, 10-22-2004 - 3:47pm

Dave Ramsey is a financial talk show host and author of several financial advice books.
His basic plan that he calls babysteps:

1. $1000 emergency fund

2. Debt snowball (smallest to largest)

3. 3-6 months emergency fund

4. 15% of your income for retirement savings (401K and Roth IRA)

5. kids college savings plan

6. pay off the house

7. build wealth

I'm still on working on step 2 but when that step is finished then the plan should begin to move fast. I can't wait to be on step 7.

Julie

iVillage Member
Registered: 07-06-2003
Fri, 10-22-2004 - 9:41pm
Julie gave you the steps he promotes in order to become financially secure. I would advise you to borrow his books - The Total Money Makeover & Financial Peace.

I too followed his advice from the book The Total Money Makeover and became debt free back in June this year (at one point the debt was over $25K - no mortgage). So now we're working on the 3-6 months living expenses which is to build up from the $1K you are to start with before tackling debt according to Dave.

We actually started with having just $500 in the emergency fund while we were paying off the debts and we were comfortable with that. Not everyone would be and many people tailor his advice to suit their preference but his real life experience from declaring bankruptcy to being the millionaire he is now is proof enough that when you get serious about solving the money problems, it can be done with hard work and perserverance.

Best of luck,

Kassandra

Kassandra

"It is said that life has its peaks and valleys.  The challenge is to accept them equally and experience them

iVillage Member
Registered: 05-30-2003
Sat, 10-23-2004 - 1:09am
His website isn't very helpful, but it is:

http://www.daveramsey.com/


The thing that helped me the most was reading "Financial Peace Revisited" where he and his wife, Sharon explain about how it all fits together. Try your library first, and if they don't have it, ask if they can get it from another library.

DH & I went through the "Financial Peace University" classes this last winter/spring. It's the only thing that I wanted for Christmas last year. Since starting the classes in January, our non-house debt total has dropped roughly $10,000+, and we have a baby emergency fund in place ($1000). More importantly, I realized that there was hope,and his way combined with snowflaking was going to set us free. He is Christian based, and does advocate tithing to your church, but if that bugs you, just know that you can give your money to whomever you please!

I can't say enough good things about this guy, although I do realize that he's not for everyone.

One of the neatest things to do is to go on his website and listen to his Friday radio shows (it's one of the links somewhere)-and hear someone call in to tell Dave, "I'M DEBT-FREEEEEEEEEEE!!!!!" It literally gives me goosebumps, and when I'm feeling like there is NO WAY we're ever gonna get there, it does wonders for my morale. :)

Lisa